Transcript of "2012 Economic Outlook"

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E C O N O M I C O U T L O O K Excerpts 2012 Economic Outlook State of Utah Governor Gary R. Herbert• Overview of the Economy—Utah typically grows Utah Economic Indicators: 2010-2012 more rapidly than the nation after recessions, and this 1.9 Utah 2010 pattern is taking hold in the current recovery. For the Population 1.5 1.6 U.S., employment grew 0.9% in 2011, compared to Utah 2011e -0.6 2.3% for Utah. While employment increased during Nonfarm Employment 2.3 Utah 2012f 2011, Utah’s unemployment rate improved, falling to 2.7 7.7%. Though housing stabilized, with building permits Unemployment Rate 8.0 7.7 at 8,700 in 2011, home-building is not leading the econ- 6.7 omy as it does during a typical recovery. 2.0 Average Pay 2.5• Outlook 2012—Economic growth in Utah is expected 3.2 to accelerate during 2012. Employment is forecast to -5.7 increase 2.7% for the year as a whole, with larger in- Home Prices -3.5 1.0 creases as the year progresses. Housing permits are -2.1 forecast to move up slightly from historic lows. As the Retail Sales 4.8 5.9 overall unemployment rate declines to 6.7%, the im- proving labor market will support increased consumer -8 -6 -4 -2 0 2 4 6 8 10 spending and a strengthening recovery. Source: Council of Economic Advisors’ Revenue Assumptions Working Group e = estimate f = forecast Highlights• Construction—The value of permit authorized construction in Utah in 2011 was estimated at $3.5 billion, slightly higher than the $3.3 billion in 2010. In inflation-adjusted dollars, the value of authorized construction last year was at the lowest level since 1992. The 6% increase in 2011 re- verses four consecutive years of decline. In constant 2011 dollars all three major construction sectors improved in 2011. Residential value was up 4.1%, nonresidential value was up 18.9% and additions, alterations and repairs were up 4.2%. It’s quite likely the value of permit authorized con- struction hit bottom in 2010, and 2011 was the beginning of a modest recovery. The number of permits issued for residential units should increase by 14.9% in 2012 to 10,000 units with a construction value of $2.0 billion. On the nonresidential side, the value of permit authorized nonresidential construction is projected to remain at $1.1 billion in 2012.• Tourism—Utah’s travel and tourism sector had a positive year in an economically uncertain 2011. The Utah ski industry experienced the second best season on record with 4,233,064 skier days. During 2011, for the sixth year in a row, national park visitation was up from the previous year as of November 2011. State park visitation was up an estimated 1.3% with visitation of 4.8 million in 2011.• Exports—Improving economic conditions in Utah, the nation, and around the globe were reflected in Utah’s production and export levels through 2010 and 2011. Utah’s total exports rose from $13.9 billion in 2010 to an estimated $16.3 billion in 2011, an increase of 18.0%. Exports have been above $4.0 billion since 2005. Assuming moderate worldwide economic growth and barring any significant collapse in gold value or another finan- cial crises, exports are expected to continue to grow to a forecast $17.0 billion in 2012.• Energy—For the most part, the energy sector in Utah continued to rebound after experiencing significant recession-related declines in 2009 and 2010. Crude oil production continues to rise as oil prices remain high, while natural gas production hit a new record in 2011 despite modest gas prices. Demand for electricity in Utah remains strong, but lack of demand in the out-of-state markets contributed to declines in Utah’s electric generation and resulted in decreases in consumption of coal and natural gas at Utah power plants. Early indications are that 2012 will continue on the path of slow and cautious growth, keeping the energy sector a bright spot in Utah’s recovering economy.• Minerals—The Utah Geological Survey (UGS) estimates the gross production value of nonfuel mineral commodities and uranium produced in Utah in 2011 totaled $4.59 billion, an increase of about $302 million (7.0%) over 2010. The estimated nominal value of nonfuel mineral production (excluding uranium) in Utah was $4.56 billion in 2011. The relative stability in production and price for most non-fuel mineral commodities pre- dicted for 2012 suggests that the overall value will not change significantly compared to the previous year. Rankings State Value Year State Rank Value YearDemographic Rank Economic Population Growth Rate 3rd 1.9% 2011 Rate of Job Growth 4th 2.5% Nov. 2011 Fertility Rate 1st 2.60 2008 Unemployment Rate 11th 6.4% Nov. 2011 Life Expectancy 3rd 78.7 years 2000 Urban Status 9th 88.3% 2000 Median Age 1st 29.2 years 2010 Median Household Income 8th $59,857 2008-2010 Household Size 1st 3.10 persons 2010 Average Annual Pay 37th $37,980 2008Social Indicators Per Capita Personal Income 46th $32,473 2010 Violent Crime 6th 212.7 per 100,000 people 2009 Poverty Rate 3rd 9.1% 2008-2010 Notes: 1. Rankings are based on the most current national data available for all states, and may differ Educational Attainment 7th 90.6% of persons 25+ 2010 from other data. 2. Rank is most favorable to least favorable. w/ high school degreeGovernor’s Office of Planning and Budget January 2012 www.governor.utah.gov/dea January 12, 2012

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PrefaceThe 2012 Economic Outlook is the second publication in what is for the most recent year or period available. There may be aan annual companion piece to the Economic Report to the Gover- quarter or more of lag time before economic data becomenor series, which is now published in the fall. Through the final, therefore 2011 estimates and 2012 forecasts in this re-last two decades, the Economic Report to the Governor has served port are based on data available as of mid-December 2011.as the preeminent source for data, research, and analysis All of the data in this report are subject to error arising fromabout the Utah economy. The Economic Outlook will focus on a variety of factors, including sampling variability, reportingan estimated summary of the previous year and a forecast for errors, incomplete coverage, non-response, imputations, andthe forthcoming year. processing error. If there are questions about the sources, limitations, and appropriate use of the data included in thisThe primary goal of the report is to improve the reader’s un- report, the relevant entity should be contacted.derstanding of the Utah economy. With improved economicliteracy, decision makers in the public and private sector will Statistics for States and Counties. This report focuses onbe able to plan, budget, and make policy decisions with an data for the state, with occasional data for county geogra-awareness of how their actions are both influenced by and phies. For information about data for a different level ofimpact economic activity. geography than shown in this report, the contributing entity should be contacted.Collaborative Effort/Contributors. Authors, who repre-sent both public and private entities, devote a significant Electronic Access. This report is available on the Gover-amount of time to this report, ensuring that it contains the nors Office of Planning and Budgets web site at http://latest economic and demographic information. While this www.governor.utah.gov/dea.report is a collaborative effort which results in a consensusoutlook for the next year, each topic is the work of the con- Suggestions and Comments. Users of the Economic Outlooktributing organization, with review and comment by the Gov- are encouraged to write or call with suggestions that will im-ernors Office of Planning and Budget. More detailed infor- prove future editions. Suggestions and comments for im-mation about the findings in each chapter can be obtained by proving the coverage and presentation of data and quality ofcontacting the authoring entity. research and analysis should be sent to the Governors Office of Planning and Budget, PO Box 142210, Salt Lake City,Statistics Used in This Report. The statistical contents of Utah 84114-2210. The telephone number is (801) 538-1027this report come from a multitude of sources which are listed and the email address is dea@utah.gov.at the bottom of each table and figure. Statistics are generally UT2012 Economic Outlook Preface iii

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National OutlookOverview the debt limit included just $2.5 trillion of 10 year deficit re-After beginning a promising recovery in the second half of duction measures, instead of $4 trillion, Standard and Poors2009, the U.S. economy has since moved forward unevenly. (S&P) downgraded the U.S. from AAA to AA+ in early Au-A number of short term events combined to slow growth gust. The S&P downgrade, combined with rising concernsbeginning in the first half of 2011. Extremely bad weather, over Europes ability to manage its debt crisis, led stock pricesan oil price spike to above $100 per barrel, and the Japanese lower during August. With Japanese production resuming,earthquake generated a broad disruption of business activity lower oil prices, better weather, and a working agreement inin the U.S. The prolonged debt ceiling debate in Congress Congress allowing the federal government to operate, em-and subsequent downgrade by Standard and Poors (S&P), ployment growth picked up after September and GDP grewcombined with concern about European debt, led stock 1.8% for the year as a whole, finishing the fourth quarter atprices lower during August. These continuing headwinds 3.4%.cumulatively created a pronounced deceleration of growthearly in 2011. With events settling, the U.S. economy re- Employment grew 1.0% in 2011, or 1.3 million jobs, barelysumed modest growth as the year ended. enough to lower the unemployment rate, which fell from 9.6% to 9.0%. Mining had the highest rate of job growth,2011 Summary 11.3%, as a jump in energy prices lead to increased explora-As 2011 opened, the recovery appeared to be pausing. After tion and production. Administrative support, which includesrising nearly 4% for several quarters, GDP growth slowed to temporary help, increased 3.9%, or by almost 300,000 jobs, as2.5% in the second half of 2010. High oil prices and bad firms shied away from permanent hires to meet increasedweather combined to lower growth to just 0.4% during the demand. Reflecting the split nature of the labor marketfirst quarter of 2011. Unprecedented flooding in the Missis- where workers with specific technical skills find jobs quickly,sippi Basin, savage tornados in Alabama and Missouri, com- professional, scientific and technical employment grew 2.7%,bined with the Japanese earthquake, tsunami and nuclear dis- or 200,000. Within the broad sector, computer systems andaster combined to hold growth to 1.0% in the second quarter. technical consulting both grew more than 5%, while employ-The nuclear disaster disrupted Japanese production and U.S. ment at law offices was flat. Health care grew 2.2%, orsupply chains, cutting automotive production and sales during 350,000, as demand for medical services continues relativelyspring and early summer. The highly partisan debate to raise unaffected by the slow economy. Increasing sales and thethe U.S. debt ceiling consumed the month of July, with an need to ship goods boosted transportation employment byagreement reached just hours before the Treasury began ex- 2.0%, or 85,000. Increasing sales also boosted wholesale andtraordinary measures to manage the federal governments retail employment by 1.6% and 0.9%, respectively, a total ofcash flow. Because the final bill passed by Congress to raise 220,000. Briskly growing demand for U.S. made merchandiseFigure 1Growth Rate of United States Real Gross Domestic Product 8% 3.9% 6% 3.8% 3.8% 3.6% 3.4% 3.0% 2.5% 2.3% 2.2% 2.0% 4% 1.8% 1.7% 1.7% 1.3% 1.4% 1.3% 1.2% 0.4% 2% 0% -0.7% -2% -1.8% -4% -3.7% -6% -6.7% -6.7% -8% -8.9% -10% -12% 2007q1 2007q3 2007q4 2008q2 2008q3 2009q1 2009q4 2010q3 2011q2 2012q1f 2012q4f 2007q2 2008q1 2008q4 2009q2 2009q3 2010q1 2010q2 2010q4 2011q1 2011q4f 2012q2f 2012q3f 2011q3e Source: Bureau of Economic Analysis and Global Insight e = estimate f = forecast UT2011 Economic Outlook National Outlook 1

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overseas, and steadily increas- Figure 2ing domestic consumer United States Nonfarm Payroll Employmentspending on big ticket itemssuch as cars and home appli- 140ances supported manufactur-ing employment growth of1.7%, almost 200,000 jobs. 135With the wind-down of the2010 Census and postal ser- Millions of Jobsvice restructuring, federal 130government had the largestrate of job decline at -4.6%,or almost 140,000 jobs. Con- 125tinuing budget difficultieslead to a decline of -1.4%, or 120over 280,000, in state andlocal employment. The con-tinuing real estate slump led 115to a decline of -0.2%, or 1996 1997 1998 1999 2001 2003 2004 2005 2006 2008 2010 2011e 2012f 1995 2000 2002 2007 200910,000, in construction em-ployment. Source: U.S. Bureau of Labor Statistics and Global Insight f = forecastSignificant IssuesNature of RecoveryKen Rogoff, of Harvard University, argues the recovery was home purchases. Nonetheless, the problem with the enor-bound to be sub-par because it followed a financial crisis. mous amount of leverage in the financial sector is if the origi-Comparing credit booms and subsequent banking panics, nal debt goes bad, as began with sub-prime mortgages inRogoff found in the typical crisis the unemployment rate rises 2006, a chain reaction is initiated, as when Lehman Brothersseven percentage points for five years. Stock values fall 56% failed in September 2008, which engulfs the non-financialfor 3½ years while home prices fall 35% for 6 years. The sectors of the economy in a deep recession.problem is the boom preceding the bust is driven by a build-up of debt, particularly consumer debt for housing. Business During boom periods, the most recent of which was betweendebt for commercial real estate and, to a lesser extent, for 2005 and 2007, high risk borrowers overextend themselvesplant and equipment to increase productive capacity, also and cannot make debt service without additional credit orincreases. Speculators finance most of their asset trading with asset sales. At the peak, lenders begin to withdraw credit toincreased debt. The combined effect is a massive increase in the riskiest and most indebted borrowers. Lending slows,spending across all sectors which is not sustainable. asset sales accelerate, their prices fall, and, as income from asset sales is insufficient to meet debt service, borrowers be-Debt in the U.S. is at historically high levels. As a percent of gin to default. The increase in bad debt makes it difficult forGDP, home mortgage debt peaked at 75% in 2007, and has businesses to finance activities. As investors begin to doubtsince declined to 65%, as foreclosures extinguish bad loans the creditworthiness of the business sector, a general panicand households pay down their mortgages. About 80% of takes hold, as the U.S. experienced during the fall of 2008.the increase in debt during the 2000s was from mortgage eq- Sales decline as consumers and business owners becomeuity extraction (MEW) used to finance consumer spending. more cautious. The decline in commercial activity and cashSince the financial crisis, MEW has essentially ended, which flow forces businesses to cut costs through lay-offs. Oncehas contributed to the decline in mortgage debt. Business the financial sector is shored up, as happened during the firstdebt, which includes both non-financial corporations and half of 2009 in the U.S., markets stabilize, uncertainty is re-millions of non-financial small businesses, peaked at 78% of duced, and recovery begins. The expansion, however, isGDP in 2008 and has since declined to 75%. Debt in the hampered by lower income and higher debt. Many borrowersfinancial sector, over half of which is from the government find themselves owing more than their assets are worth. Thesponsored enterprises (GSEs) Fannie Mae and Freddie Mac, high burden of debt service reduces purchases of new goodspeaked at 120% of GDP in 2008 and has since declined to and services, which dampens the growth of sales, production,88%. However, the financial sector is an intermediary that income, and employment. There is currently a robust debateincurs debt to purchase assets, such as mortgages, which are among economists about the proper policy following a finan-the debt of another sector, such as households. Including the cial crisis, but there is general agreement that the recovery willdebt of GSEs as a claim to be paid from GDP would be dou- be weaker than normal.ble counting, since the original debt is for mortgage financed UT2 National Outlook 2011 Economic Outlook

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During the typical recession, households and businesses put Most forecasters anticipate housing starts will remain nearoff unnecessary spending until the economic outlook be- record lows throughout 2012, though construction shouldcomes more certain. Households stop buying durable goods pick up as the year progresses. Household formation is cur-such as cars and home appliances. The demand for new rently running about 1 million per year. If the labor markethousing also falls off as people decide to stay in their existing was operating at normal levels of employment, perhaps asresidences or move in with friends or family. Businesses many as 200,000 more households would be forming. Givenstock less inventory and invest less in plant and equipment. the present demographic situation, the housing stock wouldOnce the recession ends and the outlook becomes positive, return to a normal level if no houses were built for two years.there is a pronounced increase in all types of spending. As Despite this glut, there will always be a certain portion ofspending increases, GDP grows rapidly and a strong recovery households that want to live in new homes. This underlyingsets in. Employment lags GDP a few quarters, but eventually demand for the most up-to-date living space will keep con-job growth accelerates, labor force participation increases and struction in the 600,000 unit range. As the economy im-the unemployment rate falls. The current recovery is abnor- proves, household formation will pick up and the housingmally muted because the amount of debt owed by households surplus will decline.and businesses is unprecedented. Reducing this debt burdento typical levels will take several years. During this period of The U.S. Census reported 116.7 million households in thedeleveraging, consumer spending will be depressed, which 2010 count. If demographics in 2010 were the same as 2000,will put a drag on business investment and hiring. the age structure of the population would have generated 119.1 million households. In other words, there were 2.4Housing million fewer households in 2010 than would have been ex-Housing construction is particularly depressed in the current pected given peoples behavior a decade earlier. The reces-recovery. The main reason, as Rogoff notes, is the type of sion and dim income prospects for people in their 20s explainfinancial crisis the U.S. experienced during 2008 is typically most of the absence of these 2.4 million households, and thepreceded by a real estate boom. The current situation is his- consequent surplus of 2 million units.torically unprecedented. Given the number of households inAmerica, the housing stock has a surplus of 2 million units European Debtover and above what is required to house people and have a Many parts of Europe experienced the same type of creditnormal amount of vacant housing. The slow economy and boom as the U.S. during the mid-2000s, the subsequent finan-high unemployment rate make the situation worse by lower- cial crisis in 2008, and ensuing weak recovery. Europe is dif-ing the amount of household formation that would normally ferent because its economic policy making is divided betweenoccur. the European Central Bank (ECB), which conducts a unified monetary policy for all countries using the Euro, and individ- Figure 3 Debt as a Percent of GDP in the United States by Borrowing Sector 140% 120% 100% 80% 60% 40% 20% 0% 1945 1947 1949 1953 1955 1957 1961 1963 1965 1969 1971 1973 1977 1979 1981 1985 1987 1989 1993 1995 1997 1999 2001 2003 2007 2009 2011 1951 1959 1967 1975 1983 1991 2005 Residential Mortgage Consumer Business Government Finance Source: Federal Reserve and Bureau of Economic Analysis UT2011 Economic Outlook National Outlook 3

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ual national governments, which conduct separate fiscal poli- In December, the European Banking Authority (EBA) re-cies based on unique public finance systems. ported the continent’s largest banks were short €115 billion in capital. The shortage was calculated using a required capitalSince the financial crisis of 2008, the Euro-system has been ratio, or equity as a percent of assets, equal to 9%. Spain’sespecially difficult for countries such as Greece, Ireland, Por- Banco Santander had the biggest shortage, €15.3 billion, fol-tugal, Spain, and recently, Italy. The Greek national govern- lowed by Italy’s Unicredit, at €7.9 billion. In total, Spanishment, in particular, cannot pay the debt it accumulated during banks were short €26.2 billion, followed by Italian banks atthe boom. Since early 2010, Greece has been funded with a €15.4 billion. The banks have until June 2012 to meet the 9%rescue package from the European Union (EU), lead by Ger- requirement, which they will do using a combination of eq-many and France, the ECB and the International Monetary uity raises, asset sales, and lower asset purchases.Fund (IMF). In exchange for the rescue, Greece has imple-mented a plan to balance its budget, but the short term effect The general outline of the EBA’s results became known dur-of the spending cuts and tax increases has crippled demand ing the fall of 2011, prompting investor concerns that largeand driven the economy into recession. Greeces original countries such as Spain and Italy would have difficulty withdebt was provided by a combination of local and interna- funding. In a vicious cycle, investors required higher returnstional banks. French and German banks were particularly to justify the perception of increased risk, which in turn in-large lenders to Greece, and were owed, respectively, $53 creased the likelihood of default. Yields on 10 year Italianbillion and $36 billion, by Greek institutions, including banks government bonds rose from around 4.7% in early 2011 to aand the national government, as of March 31, 2011. Because peak of 7.3% in November, before dropping toward 6.0% inof the recession and the large amounts of government debt it early December.holds, the Greek financial system is widely viewed as nearfailure. As Italy’s situation worsened, the failure of a German bond auction in November alarmed financial markets and policy-The possibility of Greek default caused the large Franco- makers. Over the summer and fall several auctions occurredBelgian bank, Dexia, to collapse. Investors supplying its where the amount of debt offered exceeded the amount soldshort-term funding felt it was too exposed to the Euro- by small margins, but 35% of the November offer did notsystem’s troubled nations. Unable to meet its obligations, the have bids. The main reason was the yield was lower thanbank was seized by the French and Belgian national govern- investors’ perception of the risk. An additional hurdle wasments in October 2011. the EBA’s capital order. The easiest way to increase the eq- uity ratio is to reduce asset purchases, such as German bonds. This conflict between the need to issue debt and theFigure 4 need to strengthen banks isUnited States Housing Shortages and Surpluses one example of the Euro- system’s problem. 4 Briefly unable to borrow on normal terms, Germany 3 moved with France to de- velop tighter fiscal coordi- nation for the 17 nations 2 using the Euro. As the Millions of Units respective national govern- ments within the Euro- 1 system prepared a compre- hensive approach to their finances, especially debt, 0 the ECB indicated it would be willing to take a more aggressive approach to -1 reduce borrowing costs. Once policy-makers cre- ated a coherent framework -2 for action, combining su- 1960 1963 1967 1971 1975 1978 1982 1986 1990 1993 1997 2001 2005 2008 2012f pervision of national gov- ernment budgets with ECB Source: Governor’s Office of Planning and Budget f = forecast UT4 National Outlook 2011 Economic Outlook

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purchases of Italian, Figure 5Spanish, and other debt, Capital Shortages at Large European Banks by Countryyields dropped and finan-cial markets began to sta-bilize. Spain ItalyHaving lent Europe over$2 trillion, U.S. banks face Germanychallenges as the crisiscontinues. The collapse Franceof MF Global, a $40 bil- Portugallion Wall Street tradingfirm, in October 2011 was Belgiumthe direct result of its Austriacreditors’ concerns it hadtoo much European ex- Cyprusposure. While this proba- Norwaybly will be an isolatedevent, the failure of SloveniaEurope to resolve its debtclouds the outlook. Netherlands 0 4 8 12 16 20 24 282012 OutlookThe consensus outlook Billions of Eurosfor the U.S. economy isslow but accelerating Source: European Banking Authoritygrowth during 2012. Ex-cess debt both at home and abroad will continue to dampen and 1.8%, respectively, or 500,000 jobs. The end of federalthe recovery. U.S. households have made significant progress stimulus for infrastructure spending, business caution on newimproving their balance sheets, which will continue as the plant and equipment, and near record low housing starts arelabor market advances. With better finances, consumers will forecast to lower construction employment 2.1%, a loss ofspend more, businesses will produce and hire more, and a almost 120,000 jobs. Tight budgets are predicted to reducestrengthening recovery will set in. Household formation will employment in federal and state and local government, 2.5%increase and the excess supply of housing will continue to and 1.0%, respectively, a combined loss of over 270,000 jobs.decline. The major risk to the outlook is Europe. A deeprecession there will slow U.S. growth dramatically, perhaps Conclusioneven causing a second recession. Assuming European policy- After a massive build-up of debt during the 2000s, the re-makers prevent another financial crisis, the U.S. economy will quired deleveraging is producing a muted recovery from thecontinue to recover with accelerating growth. financial crisis of 2008. The Japanese earthquake, high oil prices, and bad weather were strong headwinds slowingEmployment is expected to grow 1.1% for the year as a growth during the first half of 2011. The protracted debtwhole in 2012, though this will accelerate to 1.6% in the ceiling debate, S&P downgrade, and European debt crisis sentfourth quarter, keeping the unemployment rate at 9.0%. Ad- stock prices and consumer confidence lower in August. Withministrative support, which includes temporary help, is ex- events settling, growth will accelerate, hiring will pick up, andpected to have the fastest rate of growth 3.9%, or 300,000 the recovery will move toward a more typical expansion.jobs, as firms continue to shy away from permanent hires tomeet increased demand. The pickup in sales and attendantneed to ship goods will boost transportation and warehousingjobs by 3.2%, or 135,000. Likewise, better sales are expectedto increase wholesale and retail employment 2.0% and 1.6%,respectively, for a total of 340,000 new jobs. Health care isestimated to grow 2.7%, or 450,000, as demand for medicalservices continues despite weakness in other sectors of theeconomy. With the recovery gaining traction, travel and tour-ism will begin to rebound, driving employment in accommo-dation and food services and recreation up an estimated 2.4% UT2011 Economic Outlook National Outlook 5

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Utah OutlookOverview sectors of the Utah economy, none of which had decliningUtah typically grows more rapidly than the nation after reces- employment during 2011. Mining, which includes oil and gassions, and this pattern is taking hold in the current recovery. production, had the fastest growth rate, 10.1%, driven byWhile the expansion is gaining strength, the downturn that continuing high energy prices. Professional and businessbegan in 2008 continues to influence economic growth in services had the second fastest growth rate, 3.5%, or 5,300every state of the U.S., as well as every country on earth. jobs, which reflects strong underlying growth throughout theSome areas, such as Utah, are faring better than others, but economy. While the office support component of the sectorthe international dimensions of the financial system affect had strong growth, the high-paying technical services compo-every household, business, and government. A moderate, nent also advanced strongly, which may have a strong impactstrengthening recovery is the most likely outcome, but policy- on income growth and sales as the recovery continues. Edu-makers around the globe must remain vigilant to prevent cation and health grew 3.3%, or 5,200 jobs. Leisure and hos-local difficulties in places such as Greece from spreading and pitality, which includes tourism as well as local demand forcausing a second recession. The financial situation in Europe dining and entertainment, grew 3.0%, or 3,300 jobs.is widely viewed as the biggest threat to global growth during2012. Current efforts by European policy-makers seem likely Gross domestic product (GDP), the broadest measure ofto succeed, which bodes well for the U.S. recovery. Assum- economic activity, grew 1.7% in 2010. After declining 1.5%ing the national expansion continues, Utahs growth will ac- in 2009, GDP is on track to grow almost 3% in 2011. Thesecelerate above the pace of the past two years. results are in real terms, after inflation has been removed, so they represent the physical production of goods and services.2011 Summary In nominal terms, including the effects of inflation, GDPFor the year ending October 2011, Utah employment grew grew 2.9% during 2010, which includes 1.7% real growth and2.6%, or 32,000 jobs. For the year as a whole employment 1.2% inflation. Because GDP is only produced annually andgrew 2.3%, or 27,000 jobs, from 1.18 million to 1.21 million. will not be available for 2011 until summer 2012, personalAs of October, the unemployment rate was 7.0%, down from income, which is available quarterly for the current year, is7.6% a year earlier and almost two percentage points lower often used in its place. During 2011, Utah personal incomethan the U.S. The improving situation has spread across all increased 5.4%, and total wages, its largest component, in-Figure 6Nonfarm Payroll Employment in Utah 1,300 1,250 1,200 1,150 Thousands of Jobs 1,100 1,050 1,000 950 900 850 800 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012fe = estimate f = forecastSource: Department of Workforce Services, Governor’s Office of Planning and Budget and Revenue Assumptions Working Group UT2011 Economic Outlook Utah Outlook 7